The iPhone 5 story is substantial, especially coupled with the fact that Apple is facing headwinds in China and a disappointing launch of the next-generation smartphone in September. But more important is the big backstory of slowing momentum and earnings trouble.

Buy, Hold or Sell?

So, how should you trade this news?

If you’re a vulture looking for a bargain buy, I would bide your time. This is not a buying opportunity just yet.

It seems that Apple is in the painful transition from a growth investment to a value play, and there’s a lot of volatility that needs to play out. If the worst holds true, downside momentum could take shares down another 15% from here — consider DoubleLine Capital CEO Jeff Gundlach, who predicted a few months back that Apple would hit $425, and other similar targets.

So should you sell or hold, then, if you’re a current shareholder?

That depends on your philosophy. If you’re a short-term trader, you already should have run screaming for the exits when the negativity picked up a few months ago. But if you haven’t sold yet, I would seriously consider an exit soon. Maybe not today into downward momentum, but very soon. The risks are real and the upside is limited, so move on.

If you’re a long-term investor in Apple — which, for the record, I am personally, buying in over the last year or two — then there’s hope … But not in the form of $700 price targets or exponential growth.

No, your hope is in a long-term investment that is fairly valued, with modest growth ahead and big dividend potential.

Sure, disappointing iPhone sales mean that estimates could come down. But even if they do, there’s room when you account for a forward P/E of less than 9 based on fiscal 2014 earnings of $56 a share, according to S&P forecasts. Yes, the iPhone might no longer be as dominant — but its hard to believe that Google (NASDAQ:GOOG) and its Android OS will ever significantly marginalize the device. And what, Research In Motion (NASDAQ:RIMM) and BB10 or the Windows Phone from Microsoft (NASDAQ:MSFT) are going to kill it? Please.

Furthermore, I would be reluctant to punch out before you see what Apple plans to do with its dividend. As in, will it increase its payout annually at a 7% to 10% clip? If so, that’s a compelling reason to stick around because you will be getting twice the payday a decade from now at those rates.

And don’t discount your yield on cost as an Apple shareholder. Consider that if you bought at $400 a share in January, your yield is 2.6%. Not bad. And if you bought at $250 a share in 2010, your yield is a whopping 4.2%. Why would those of us with a decent dividend — and hopes of a bigger dividend going forward as Apple sits on a mammoth war chest and has a payout ratio of just 22% — trade in a yield like this for something else? What 4%-yield stock out there looks better right now, I ask you?

At any rate, I wrote a few weeks ago that Apple has no middle ground. It’s either a trade of a few weeks or a trade of a few years, and investors need to decide where they stand.